Ben Lloyd: Obamacare puts my business at risk

As a Rhode Island restaurant owner, I can only look at the next few years with a sense of dismay regarding the Affordable Care Act and how it will affect my current employees or my ability to hire new...

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By
Ben Lloyd
Posted Nov. 5, 2013 @ 12:01 am

As a Rhode Island restaurant owner, I can only look at the next few years with a sense of dismay regarding the Affordable Care Act and how it will affect my current employees or my ability to hire new ones.

The Affordable Care Act suffers from a number of structural problems that, taken together, will severely limit my employees’ earnings and opportunities, as well as my business’s ability to expand and create new jobs.

The law’s biggest problem is its definition of a full-time employee as someone who works only 30 hours per week. Putting aside that this undermines the traditional 40-hour work week, this requirement has the unfortunate effect of limiting employee flexibility in the workplace.

One of the reasons why employees find working in restaurants so rewarding is the opportunities that they have to mold their job to their life situations. Part-time employees looking to pick up some extra hours can pick up a dinner shift; full-time employees looking for some overtime can get some extra hours on different days.

This freedom becomes extremely limited under the Affordable Care Act. Restaurants like mine, which only run single-digit profit margins, don’t have the spare cash to both pay for health care and give employees the opportunities they crave.

Thankfully, I’m able to avoid some of the law’s negative effects because my business is too small. But this has a perverse effect on my business’s ability to grow. If I expand by just a few employees and cross the law’s threshold of 50 full-time-equivalent employees — to say nothing of starting a second restaurant, as I had hoped — then the law would suddenly add hundreds of thousands of dollars to my bottom line.

Thus, my plans for expansion might never materialize. Anything more, and I jeopardize my restaurant’s very existence. The only other option is to expand, but also to cut employee hours so much so that that 50-person limit is never reached.

Think of what this means. The economy grows when small businesses grow. Yet when such firms are hamstrung, as they are by the Affordable Care Act, then the growth engines of the American economy are essentially set to idle. And growing while harming employees is no solution at all.

This shows just how arbitrary the 50-employee limit is. According to the law, passing that limit makes you a “large business.” Never mind that a business with that many employees is a single-store outlet, or possibly just a local business with two or three locations. In the eyes of the law, these small businesses are no different from Microsoft or Boeing, even though their profit margins run into seven and eight figures.

But here’s the kicker: Even many truly large companies can’t absorb sudden increases in labor costs like those imposed by the Affordable Care Act. White Castle, for instance, will not be hiring as many full-time employees, while other chains have taken steps to limit employee hours to less than 30.

If those firms are reeling from the law, then think about what happens to small business. My business, for instance, hits a 3 percent profit margin in a good year. Once I’m pushed over that line, it’s my employees’ hours, their flexibility, and their perks that have to give.

And it’s not just me and my employees who will get hurt. It’s also important to consider the effects that this will have on other restaurants across the state. Rhode Island may be small, but the restaurant industry is an enormous economic force. With nearly 2,700 locations and 50,000 employees, restaurants account for 11 percent of the state’s workforce. This year, we expect a combined growth rate of 6.5 percent.

Our employees — as well as our customers — are also responsible for an incredible amount of economic activity. We’re expected to register almost $2 million in sales this year alone — and every dollar of that total generates an additional 81 cents across the state.

These are more than numbers. They’re jobs, they’re livelihoods, they’re families, they’re individual success stories. Yet much of this is jeopardized by the Affordable Care Act’s poor design and the unintended consequences that result from it.